India likely to double home loans to $600 billion in 5 years: HDFC’s Parekh

This would coincide with the period when India attains its much-aspired goal of becoming a $5-trillion economy, he says.

Demand for home loans will continue to remain robust and India should be able to double its home loans to about $600 billion in the next five years, HDFC Ltd. chairman Deepak Parekh said in a letter to shareholders.

“This would coincide with the period when India attains its much-aspired goal of becoming a $5-trillion economy,” he said.

Mr. Parekh said despite the doubling of housing loans, India’s mortgage penetration would still remain low at 13% of the GDP.

“Now is the time to ask ourselves what will it take for India’s mortgage-to-GDP ratio to cross 20% and beyond? When one looks at comparable Asian economies, the average mortgage-to-GDP ratio ranges between 20% and 30%. This implies that housing loans in India will have an exponential growth trajectory for decades to come,” he added.

Reiterating his bullish stance on the growth of home loans he said, “Despite the recent headwinds in the global macro landscape, I continue to maintain this stance. India is in the cusp of an economic transformation. As the pivot of global growth shifts, India is envisaged to remain amongst the fastest-growing major economies. Much of India’s growth will continued to be powered from domestic consumption,” he added.

Touching upon the proposed merger of HDFC Ltd. into its offspring HDFC Bank Ltd., Mr. Parekh said: “At HDFC, we know that this is the right time for strategic choices as we prioritise pathways for future growth. Our moment of truth is that the optimum path to scale of housing finance is to be housed within a banking structure. The pool of resources for lending will be significantly larger and at lower costs”.

He said that from a regulatory perspective, it was prudent for all large providers of housing finance to operate on a level-playing field, with the same rules. Globally too, the scale of mortgage assets was exponentially larger in banks compared with non-banking financial entitles.